Do you have employees in Alabama? There are some changes to the overtime rules you need to be aware of for employers in Alabama.
Starting on January 1, 2024, and continuing until June 30, 2025, compensation earned by a full-time hourly wage-paid employee for hours worked beyond 40 during a workweek is exempt from Alabama state income tax. Additionally, there are updated reporting obligations for employers to fulfill with the Alabama Department of Revenue.
In accordance with ACT 2023-421 Alabama Overtime Pay Exemption, employers must report both the overall aggregate amount of overtime disbursed and the total count of employees who received overtime pay in the State of Alabama.
- A one-time report showing Historical 2023 Overtime Data was due by January 31, 2024, that required employers to report the aggregate amount of overtime paid during the 2023 calendar year and the total number of full-time hourly employees who received overtime pay in 2023.
- Beginning with the 2024 tax year, employers are required to report monthly and quarterly with the Form A-6 and Form A-1 withholding returns, respectively. Employers will need to report the following:
- Aggregate amount of overtime paid (new exempt portion) during the period (month/quarter)
- Total number of full-time hourly employees who received overtime pay.
You can find more information about the Department of Alabama’s reporting requirements here.
Costpoint has introduced new applications enabling employers to adhere to Alabama’s latest reporting requirements.
Print State Overtime Wages Report Screen
The recently introduced Print State Overtime Wages Report screen is designed to generate a summary of the total amount disbursed and the number of hourly employees who received overtime pay within a specified Taxable Entity, check date range, and Withholding State. You have the option to include a list of employees in the report. Currently, this report is specifically applicable to the State of Alabama.
If the check dates fall outside the range of January 1, 2024, to June 30, 2025, which is beyond the period covered by Alabama's temporary Overtime Pay Exemption, the overtime wages paid will be determined using only overtime pay types. Ensure that the Overtime checkbox for the relevant pay types is selected on the Manage Pay Types screen.
However, if the check dates fall within the effective period of Alabama's temporary Overtime Pay Exemption, the calculation of overtime wages will involve both overtime pay types and the taxability of overtime pay types. The necessary setup for this must be performed on the Manage Pay Types screen and the Manage Pay Type Taxability screen.
How to Set Up Alabama Overtime Pay Exemption
- On the Manage Pay Types screen, create a new pay type code to represent the Alabama Overtime Pay Exemption pay type.
- Select the Overtime checkbox under Pay Type Categories.
- Make sure the Salaried checkbox is cleared under Employee Eligibility.
- On the Manage Pay Type Taxability screen, create a new record for the Alabama Overtime Pay Exemption pay type.
- On the State subtask, create a new row, add Alabama and select Exempt from the Income Taxability drop-down.
Configuring your system as detailed above and utilizing the new reporting screen ensures that Costpoint not only keeps you in compliance with Alabama’s new requirements, but also contributes to streamlining payroll processes and boosting overall efficiency. In the face of evolving labor laws, a flexible and robust software solution like Costpoint proves to be a strategic advantage. Redstone Government Consulting has Costpoint and Human Resource experts that can help answer questions related to the new laws and applicable system setup; contact us if you need assistance!
Mallory is a Deltek Costpoint Consultant with Redstone Government Consulting, Inc. She provides support to government contractors within the People and Time & Expense modules, including outsourced payroll services, the implementation and operation of Costpoint, and assisting with employee training and troubleshooting. She possesses excellent problem-solving skills and enjoys providing outstanding customer service.
Professional Experience
Mallory’s career began in higher education, where she worked for over 15 years. She has extensive accounting experience, including account reconciliations, budget tracking, and forecast preparation and review. She has managed department personnel and has experience with policy and procedure development. She has managed multi-million-dollar budgetary accounts and led efforts to move to a paperless office.